Stamp Duty Land Tax

It is well known that HMRC are looking at ways to increase the tax paid on residential properties that are worth over £2 million and which are owned by non-natural persons. Broadly speaking, a non-natural person is a company or a partnership with a company as a partner.

HMRC have already taken one step to achieve their aim through the introduction of a 15% rate of stamp duty land tax (SDLT), payable on the purchase of residential property worth over £2 million by a non-natural person. Additional steps are planned, including the introduction of an annual charge on such properties and possibly the extension of capital gains tax to cover the sale of UK residential properties by non-resident non-natural persons.

HMRC are currently drafting the annual charge rules which are expected to be effective from 6th April 2013 but it seems that after consultation with experts, they may be building a substantial series of exemptions which could also be applied to the already introduced 15% SDLT charge . That rate of SDLT came into being in March 2012 with relief for property purchased via a property development company that has been trading for at least 2 years.

We understand that any such changes would not be retrospective meaning that it may be the case that certain property transactions would only be caught by the 15% rate if undertaken between March 2012 and April 2013 when the introduction of the new rate and the introduction of new exemptions might come into force. It may be that if you are considering a transaction that could be caught by the 15% rate, there could be two choices: delay until it is clear what the new rules might bring in terms of exemptions or consider SDLT planning. All should become clear with the Budget next year. It could be that if a transaction is delayed until after Budget Day next year, new exemptions will apply which may not be available if the transaction takes place before then.

It is also by no means certain that the capital gains tax extension will be introduced as this could have a catastrophic impact on foreign investment in the housing market. Currently, property held by an offshore company that is not UK tax resident will not normally be subject to UK capital gains tax on a sale at a profit.

Please contact us to discuss how the changes might impact upon planned property transactions.

Contact us

If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com.

As had been expected, the 2018 Spring Statement update did not include any major tax policy announcements; rather it provided a number of consultations that suggest potential legislative changes in the future. Read more about the areas set for exploration here.